October Market Report

October Residential Highlights

October’s statistics show similar patterns to September, as the number of transactions continue to drop and sale prices continue to see appreciation. The number of closed sales fell 25.5% and pending sales declined 22% However, the number of new listings dropped for the first time since February of 2006, decreasing 5.1% this month when comparing October of this year with October 2006. At the month’s rate of sales, the 15,567 active residential properties would last approximately 8.4 months.

Appreciation

Using the average sale prices for the twelve months that ended with October 2007 compared to the twelve months ending in October 2006, the average sale price appreciated 6.7% ($339,300 v. $318,100). Using the same formula, the median sale price also appreciated 7.3% ($287,500 v. $267,900).

Year-to-Date Trends

When comparing the period of January 2007 through October 2007 to the same time a year ago, pending sales have decreased 13.9% and closed sales declined 11.3%. New listings, on the other hand, are up 8.8%.

Affordability

After its lowest reported rate of 88% in July, affordability improved to 94% in September carried by lower interest rates and a lower median sales price. This means that a family living in the Portland Metro area making the median income ($63,800 per HUD) cannot afford to purchase a median priced home in the area ($283,500 in September). According to the NAR formula, a median income family can only afford 94% of a monthly mortgage payment with 20% down and a 30-year fixed rate (6.38%, according to Freddie Mac). For more information, see graph and notes on last page.

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No Slump in Salem Market!

SALEM, Oregon isn't the hippest town around but medium sized cities like Wenatchee, Washington and Provo-Orem, Utah still have quite active real estate markets. There are plenty of homes on the market and the prices haven't nose-dived like in much of the country. In fact housing prices are growing at double-digit rates according to a recent federal study.

Many of these towns are still showing population growth due to things like proximity to nature, main freeways and more major cities. Most of them were not even a part of the original housing boom so they didn't have any where to go but up. The Pacific Northwest in particular was slow to catch on to the extreme home appreciation which might be why it's not being hit as hard now.

"Fifteen out of 20 metropolitan areas with the highest rates of home appreciation in the country were in Washington, Idaho, Utah, Oregon, Colorado or New Mexico, according to the federal study, which looked at markets with at least 15,000 transactions over the last 10 years." Associated Press

Oregon itself had 10.77 percent growth in home prices while the whole country averaged only 0.5 percent. Salem alone reached 13.4 percent from the being of 2006 to the beginning of this year. The state capitol continues to see rising prices because it goes overlooked so there are still bargains to be found.

That's not to say that it can't or won't happen here too, we just won't be taking the brunt of the force. It's always best to be prepared because our market will be effected. If you have the resources and time to spare, now is the time to buy.

http://www.kgw.com/lifestyle/stories/kgw_071907_business_salem_housing.8f345382.html

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Portland Scores!

Travel and Leisure took 25 major U.S. cities and rated them placed them 1-25 on 63 categories. It covered the topics of After Dark, Characteristics, City Scape, Culture, Food/Dining, People, Shopping and Type of Trip. Naturally you are dying to know how Portland fared in these areas and we did well exactly where you would expect us to. We ranked #1 in seven categories which were Public Parks/Spaces, Pedestrian Friendliness, Access to Outdoors, City Scape Overall, Environmental Awareness, Ease of Getting Around/Public Transportation and Characteristics Overall. With numbers like these we could become a major tourist draw. Luckily we didn't score dead last in anything but we did get some 24s and 23s. Sports Fan Vacation, Luxury Boutiques, Jewelry, Clubbing and Big-Name Restaurants don't seem to be our strengths but aren't necessities to have a good time. And just because our restaurants don't have celebrity chefs certainly doesn't mean our food isn't fan-freaking-tastic! We scored 2s in Coffee and Farmer's Markets and 7s in Cheap Eats and Pizza! We also score 2s for Peace and Quiet and Cleanliness which is awesome but I personally would like it if we made an effort to improve out Nightlife scores!

http://www.travelandleisure.com/afc/2007/

http://www.travelandleisure.com/afc/2007/city/portland-oregon

http://news.yahoo.com/s/nm/20071022/od_nm/philadelphia_unattractive1_dc

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Market Action for September

September Residential Highlights

When comparing September 2007 to September 2006, new listings decreased 2.3%. Closed and pending sales fell 25.5% and 25.7% respectively. At September’s rate of closed sales, the

16,054 active residential listings would last approximately 8.6 months.

The 8.6 months of inventory is the highest rate since January 2000, when inventory reached 10.1 months. Additionally, inventory reached 8.5 months in January 2001.

Appreciation

Using the average sale prices for the twelve months that ended with September 2007 compared to the twelve months ending in September 2006, the average sale price appreciated 6.9% ($337,700 v. $315,800).

Using the same formula, the median sale price also appreciated 7.5% ($285,000 v. $265,000

Third Quarter Report

In third quarter of 2007, there were 3.4% more new listings than July- September 2006 (16,573 v. 16,023). Closed sales fell 13.7% (7,351 v. 8,519) and pending sales also dipped 19.6% (6,711 v. 8,342).

Correction

Due to a reporting inconsistency in August, the average sale price was $355,000, not the reported $366,900. The median sale price was $302,000 vs. $300,000. Also, the average sale price in area 156: Yamhill County was $273,400, not $564,500. This discrepancy didn’t affect other Portland area statistics such as appreciation, DOM, or inventory.

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Oregon Market

Oregon

A booming local economy has rained appreciation in the Oregon housing market and the faucet doesn’t look like it’s turning off for some time yet.

Although sales of homes have slowed in the Portland area, the national trend of a depreciating housing market hasn’t hit Portland. Prices are up and should stay that way through the year’s end. The median price for a home has hit $241,000 and Housing Predictor now forecasts that Portland will see healthy appreciation of 6.7% in 2007.

Driven by a healthy job market, housing prices in Portland have more than doubled in the past decade. Oregon is the third fastest growing state in the nation.

City	Median Price	Forecast
Portland	$ 241,000	6.7%
Eugene	$ 206,000	5.2%
Salem	$ 190,000	6.4%
Medford	$ 158,000	4.5%
Corvallis	$ 153,000	5.8%
Grants Pass	$ 141,000	4.5%
Bend	$ 217,000	4.2%

In Salem the median price has reached $190,000, and home sales have slowed after hitting nearly 16% in appreciation in the last year alone. Salem housing, however, is still moving at a relatively brisk pace and is projected to see appreciation of 6.4% in 2007.

However, in Eugene, which has grown more in the last few years than the previous twenty, the community has attracted new businesses and jobs. Like the rest of Oregon, the market has slowed. The median price for a home in Eugene is $206,000 up more than 50% over the past three years. Eugene is projected to finish 2007 with an average of 5.2% in appreciation.

In Corvallis, where homes are less expensive with a median of $153,000 the market will see less activity in 2007 on its way to a 5.8% increase in average prices. Medford is fairly close price wise with a median at $158,000. Medford will see a modest 4.5% in average appreciation by year’s end.

On the roaring rapids of the Rogue River, Grants Pass is now a community of slightly more than 11,000 residents and it has had its own real estate boom. Grants Pass has doubled in size in the past ten years as more and more people have sought out a better quality of life, fleeing big city congestion and pollution. Its housing market boomed, but like the rest of Oregon has slowed down. Grants Pass will have to pass on it’s double digit days of appreciation in 2007 and settle for 4.5%.

As a growing snow skiing destination and second home market, Bend, Oregon has become a vibrant community with many new homes and condos. Bend will see a more modest year in home sales throughout the rest of the year and finish 2007 with a projected 4.2% average in appreciation. Bend’s median housing price has topped $217,000.

Oregon has suffered from being one of the weakest west coast states economically, but the state’s economy has improved drastically with an increase in businesses and new employers. Many new residents have been attracted for its lower cost of living, high employment rate and lower priced homes. But now the price of housing has also changed.

Source: Housing Predictor LLC 2006-2007

FYI: So far this year, Portland metro has appreciated on average 7.8%. They're pretty close!

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Beaverton Traffic Signals Will Improve

Beaverton is getting a new traffic timing system along Southwest Canyon and Farmington roads. Thank goodness because no one goes to Beaverton during rush hour unless they have to, and that is because of the traffic. The city is spending $60,000 to evaluate the timing of the signals and create a new timing sequence that, in theory, will make traffic much nicer. The schedule will reflect high-volume hours with more green lights on the major streets, which will make many people happy.

Other areas that already have coordinated signals include a section of Farmington Road, Canyon Road and the Beaverton-Hillsdale Highway. Most complaints about traffic signals usually result from a malfunction.

We can expect to see installation start sometime this month. They are going to do real time traffic flow models for Farmington, Canyon and Beaverton-Hillsdale.

There are video cameras around the city monitoring about a third of the signaled intersections and these can tell us what type of traffic there is at a given time and set the lights accordingly. Ideally they would like to have cameras at all of the intersections.

Meanwhile the city will soon install fiber optic conduit from the Farmington Road/Lombard Avenue intersection to the Beaverton Transit Center. The change would allow a connection with Portland’s traffic system, ODOT and Washington County, which in the future will create a regional signal management system, according to city officials. The installation will be done as part of infrastructure preparation for the county’s 14.7-mile commuter rail line.

http://www.beavertonvalleytimes.com/news/story.php?story_id=119212734778588900

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Mortgage Rate Info

Mortgage Rate News/Analysis

The Fed has been lowering key short-term interest rates for a couple of months now. On September 18, they dropped the federal funds rate by 1/2 percent.

What is the Federal Funds Rate?

Suppose a bank has excess funds. They hold them in reserve at the Federal Reserve Bank. They may choose to lend them overnight or for a couple of days to a bank that is temporarily short on funds. One bank can lend their "federal funds" to another bank. That is the Federal Funds rate.

The discount rate is the interest rate at which banks borrow money directly from the Federal Reserve. Back in August, the Fed cut the discount rate by a 1/2 percent, too.

Most experts feel further interest rate cuts are in the future.

Why does the Fed cut short-term rates?

The intent is usually to boost the economy or prevent it from sliding into a recession or to lessen the impact of a recession. By making money cheaper for banks to borrow, the idea is that they will charge less to lend it out to consumers and businesses. That releases other funds, so that consumers and business can spend it on goods, services, and capital investment.

At times, a drop in interest rates could also fuel a reduction in the value of the dollar. This is partly because overseas investors will rethink whether they should be putting money into USA investments (like stocks, bonds and real estate) because they are now earning a lower return on their money. So they take their money home -- or place it in investments in other countries with higher interest rates.

Lowering the dollar's value makes it more expensive to travel overseas and some imported goods may cost more, but it accomplishes the opposite, too. More tourists spend more money here because things are cheaper. More tourists visit. US exports to other countries are more attractive to foreign buyers, so we sell more goods overseas.

This helps boost the economy, or when a recession may be looming, it could make that recession less severe.

For the mortgage market, drops in short-term rates most impact adjustable rate mortgages because they help lower the indexes that the adjustments are based on.

Unfortunately, what's good for short-term rates has very little to do with longer-term fixed rates. When short-term rates were lowered on September 18, 30-year fixed rate loans jumped about 1/8th of a percent.

Since fixed rate mortgages lock the lender and investor into a fixed return for a long period of time, the rates that banks offer new borrowers goes up and down based on how they perceive the future threat of inflation.

Interest Rate Prediction

Because the Fed has finally begun to take action on the potential economic slowdown, fixed rate mortgages should remain fairly stable in the short term. What would make our expectations change is if economic data begins to show a clearer indication of whether the economy is actually slowing or not.

We think the economy will continue to slow.

No one can guarantee economic or interest rate predictions, of course.

Clint Elliott

NewLine Home Mortgage

1400 NW Irving #108

Portland, Or 97209

888-488-5731 toll free

503-548-4014

503-808-9101

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